A USDA loan is a mortgage program offered by the U.S. Department of Agriculture. It is geared towards eligible rural and suburban homebuyers and offers zero down payment. It is also commonly known as the USDA Rural Development Guaranteed Housing Loan Program.
A USDA loan offers loan guarantees through an authorized lender, offers direct loans for those who are low-income, and can offer home improvement loans or grants. Income qualifications are based on a mix of debt to income ratios and credit scores. The mortgage, interest, and insurance cannot exceed 29% of your income, and other debts cannot exceed 41% of your income. They may consider higher debt to income ratios for those with a credit score above 680.
Income must be verifiable for at least the past 24 months and your credit history must not have any lines turned over to collections within the past 12 months. There are some circumstances they would consider outside of this – such as those out of your control.
These are mainly targeted for purchases in rural areas, with a few exceptions for suburban areas.
It is best to start with your state’s USDA office to see a list of qualified lenders and any other options that may exist.